Fino Payments Bank IPO: Information analysis

Fino Payments Bank is, essentially, a fintech company offering a diverse range of payment focussed financial products and digital services. Its promoter (Fino PayTech Limited) received RBI's approval to carry on the business as a payments bank in March 2017 and the company commenced operations in June 2017. Being a payments bank, it has to comply with restrictions imposed by RBI such as: Payments banks cannot undertake lending activities. They can accept only savings and current deposits. The aggregate limit per customer is Rs 2,00,000. They are required to have a minimum of 25 per cent of their physical access points, including business correspondents, in rural areas. The primary source of revenue for the Bank is the fees and commission it charges for its products and services. Fino's offerings include various types of current accounts and savings accounts (CASA), issuance of debit cards and related transactions, facilitating domestic remittances, open banking functionality, withdrawing and depositing cash (via micro-ATM or Aadhaar Enabled Payment System) and cash management services (CMS). Fino Payments Bank is the only payments bank to offer a subscription-based savings account in India. The Bank's merchants (7,24,761 as of June 30, 2021) also leverage their customer relationships within their respective communities to facilitate cross-selling of third-party financial products and services such as gold loans, insurance, bill payments and recharges. It also manages a large business correspondents (BCs) network (17,430 as of June 30, 2021) on behalf of other banks. The Bank caters to the "unserved and underserved" population and has grown its operational presence to cover over 90 per cent of districts as of September 30, 2021. According to CRISIL, the addressable market for the Bank was approximately Rs 0.85 lakh crore in FY21 and the market is expected to grow at a CAGR of 16 per cent over the next four years. Strengths Asset-light business model: The Bank relies on fee and commission-based income generated from its merchant network and strategic commercial relationships. Such a merchant-led distribution model requires minimal capital expenditure because the on-boarding and setup costs are borne by the merchant. This, along with its focus on technology, enhances the scalability of its delivery model. Technology-focused: Fino's focus on and use of technology throughout its business helps it in improving its operating leverage as it limits variable costs. The Bank made investments of Rs 13.9 crore, Rs 22.9 crore and Rs 66.9 crore in FY19,